1977 (5) TMI 74 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of sub-sections (7) and (8) of section 14-B of the Punjab General Sales Tax Act, 1948.
2. Competence of the State Legislature under entry 54 of List II of Schedule VII of the Constitution.
3. Repugnancy to the general scheme of the Act.

Summary:

1. Vires of sub-sections (7) and (8) of section 14-B of the Punjab General Sales Tax Act, 1948:
The judgment addresses the question of the vires of sub-sections (7) and (8) of section 14-B of the Punjab General Sales Tax Act, 1948, as amended by Punjab Act No. 9 of 1974. The petitioners contended that these sub-sections were beyond the competence of the State Legislature. The court examined the amendments made to sub-sections (6), (7), and (8) over the years and noted that the new provisions are not based on the assumption that goods were transported after sale within the State. Instead, the current basis is the attempt to evade tax, with a condition precedent that the authorized officer should record a finding of such an attempt. The court held that the prevention of evasion of sales tax is incidental or ancillary to the levy of sales tax and falls within entry 54 of List II of Schedule VII of the Constitution.

2. Competence of the State Legislature under entry 54 of List II of Schedule VII of the Constitution:
The court referred to the Supreme Court's decision in Check Post Officer, Coimbatore v. K. P. Abdulla and Brothers, which dealt with the vires of section 42(3) of the Madras General Sales Tax Act, 1959. The Supreme Court had held that the power to seize and confiscate goods was not incidental or ancillary to the power to levy sales tax. However, the court distinguished the present case by noting that the amended section 14-B(7) is based on the attempt to evade tax and not on the assumption that goods were transported after sale within the State. Therefore, section 14-B(7) was held to be within the constitutional sanction.

3. Repugnancy to the general scheme of the Act:
The petitioners argued that section 14-B(7) contemplated the imposition of penalty for attempting to evade tax even before the liability to tax had arisen, which was repugnant to the general scheme of the Act. The court referred to the Supreme Court's decision in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver, where a similar provision was held repugnant. However, the court distinguished the present provision by noting that section 14-B(7) provides for the imposition of penalty based on the value of the goods, not on the tax payable. The court held that there is no repugnancy between the provision for levy of penalty under section 14-B(7) and the general scheme of the Act. The writ petitions were dismissed with costs.

Conclusion:
The court upheld the vires of sub-sections (7) and (8) of section 14-B of the Punjab General Sales Tax Act, 1948, as amended, and dismissed the writ petitions with costs. The judgment emphasized that the prevention of tax evasion is incidental or ancillary to the levy of sales tax and falls within the legislative competence of the State Legislature.